GBP/USD: Trading the British Services PMI Sep. 2014

British  Services PMI is based on a survey of Purchasing Managers in the  services industry. The survey asks respondents for their view of a wide range of business conditions, including employment, new orders, prices and inventories. A reading which is higher than the market forecast is bullish for the pound.

Update:  UK services PMI jumps to 60.5

Update:  Reports about a Ukraine-Russia ceasefire gave a small boost to the pound just before the release.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on  Wednesday at 8:30 GMT.

Indicator Background

UK  Services PMI rose to 59.1 points in July, marking a 8-month high. This beat the estimate of 58.1 points. A reading above the 50-point level signifies expansion. The markets are expecting another strong reading, with the estimate standing at 58.6 points.

Sentiments and levels

It’s been a rough summer for the pound, which has been no match for the US dollar. After around two months of falls, cable may have finally found a bottom. This week’s key figures, led by PMI releases,  are set to remind us that the state of the British economy is actually  quite good and that the BOE will likely raise rates before the Fed does.  So, the overall sentiment  is bullish  on GBP/USD towards this release.

Technical levels, from top to bottom:  1.6740, 1.6660, 1.6615, 1.6525, 1.6465 and 1.64.

5 Scenarios

1. Within expectations: 56.0 to 61.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 61.1 to 65.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 65.0. The likelihood of a very sharp expansion is low. Such an outcome could prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations: 51.0 to 55.9: A weaker reading than anticipated could push the pound below one support level.
5. Well below expectations: Below 51.0: A very  poor reading could  cause GBP/USD to break through a  second support level.

For more about the pound, see the GBP/USD forecast.

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